Whether you rent a storage unit for a few months or long-term, you may be wondering if the expense is deductible on your taxes. The good news is there are two cases in which you can deduct the amount you pay for storage on your form 1040: when it's related to your business and when you rent storage during a move. It's important to understand that there are rules for when you are eligible to deduct storage unit costs.
There's no doubt about it: moving can be expensive. According to the American Moving and Storage Association, the average cost to move between states is more than $5,600 but the cost can be even higher. Moving expenses add up with truck rental, movers, packing supplies, hotel stays, gasoline, and storage to consider. The good news is the cost you pay to rent a storage unit is tax deductible, along with these other moving expenses, as long as you satisfy distance and job tests from the IRS. The IRS only allows you to deduct moving expenses when your move was job-related. This means your moving costs and storage unit fees can be deducted if you moved to take a first job, change jobs, or got transferred, as long as your employer isn't covering the costs.
The bad news is this deduction was changed in 2018. Continue reading to find out about new tax rules for moving expenses.
To make sure your move is actually job-related, the IRS requires full-time employment for 39 weeks (10 months) of the first 12 months of your move. You don't need to spend all 39 weeks with the same employer but you must be employed full-time in the same general area. If you get transferred again or laid off after your move, you will still be fine if you have already deducted the expenses of your move.
The second test you must pass is the distance test. Your commute from your old house to your new job must be a minimum of 50 miles longer than your old commute to work. As an example, if you previously lived 15 miles from work, your new job must be at least 65 miles from your old house to qualify for the deduction.
If you moved for a job in 2017, you can deduct your moving expenses on your 2017 return even if you don't itemize by filing Form 3903. Unfortunately, moves in 2018 and beyond will not be tax-deductible.
The Tax Cuts and Jobs Act (TCJA) suspended the moving expense deduction for 2018 through 2025.
During this period, you also can't exclude income if your employer reimbursed you for moving expenses which means you will need to pay taxes on the reimbursement. The only exception is for active-duty military members who move due to a military order. This means you won't be able to deduct storage unit costs related to a move for a job after 2017.
If you use your storage unit for business purposes, you aren't alone. Many small business owners appreciate the low cost and flexibility of self-storage units to do everything from storing tools and inventory to storing out-of-season storefront décor. A storage unit can be classified as rent and deducted as a business expense as long as it's a "reasonable, necessary, and ordinary" expense for your business.
There are many ways to use your storage unit that qualify as a business expense. Here are some examples:
If your storage unit is mixed-use, which means you also store personal belongings along with business items, it's important to allocate the cost of the storage unit between personal and business use. For example, if you rent a 10'x10' storage unit for $140 per month and you use only 60% for business purposes, you can only deduct $84 in monthly rent.
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